Its Time to Regulate Large Hedge Funds and Banks

Quote from rcanfiel:

First take some economics lessons.

Things like Hedge funds (and derivatives trading) take risk out of the system. You have a lot of it backwards.

Traders assume the risk that others want. Otherwise WE would assume the risk.
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Usually, and when they are wrong they go to their buddies in Washington and ask for some favorable terms on money. And since most of the big shots in treasury the fed etc move back and forth between important jobs in Washington and Wall Street its a cozy little cartel and it all works out just fine for the Masters of the Universe. In the end WE (Mainstreet) do assume the risk when they (Wall Street) are wrong anyway. What the hell do you think happened two weeks ago when the EU and the Fed added hundreds of billions in liquidity to the system over two days, and when even that did not work the Fed went ahead and lowered rates at a time when that should clearly not be happening. The Fed is throwing money out of helicopters right now to bail people out.
 
I agree.
We need to reassign all the regulators to hedge funds so that the wealthy, smart investors in those funds are protected.
Of course, that means we have to remove regulators from their current work,
which is protecting average, working people from penny stock fraud, sleazy brokers, and other financial scams.
What a great idea.
NOT!!:(
 
Quote from aeliodon:

Why should rates plummet, people lose their homes, and people lose their jobs just because some large hedge funds and banks made: some bad trades, over leveraged themselves, didn't understand risk, didn't cut their losses, averaged down, and then ended up doing a clearance sale that brings down the entire world markets and economies?

I'm only calling for regulation of large hedge funds with over 500 million aum. And all that I ask is that they clearly state their leverage and state how illuquid the securities they are dealing with.

As for banks - any lender that gives a minimum wage toilet bowl cleaner a jumbo loan, with no money down, no income verification, and no documentation ought to be made a criminal - because these actions endanger the assets of all the other responsible depositors at the bank.
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The banking system has been regulated for almost a century, that hasn't stopped it going bust or suffering gigantic losses numerous times during that period. What good did the regulation do then?

Also can you please explain how hedge fund trades have forced anyone to take on no-money-down mortgages way beyond their means, or made anyone decide to take up condo-flipping for a living? No one who was financially responsible will lose their home as a result of the subprime crisis.

The only people who lose out when hedge funds blow up, are hedge fund investors. I don't think multimillionaires are the people most urgently in need of regulatory protection right now, do you?
 
Banks didn't make these "sub-prime" type of loans....the borrower would not qualify for a conforming loan from a bank..

It really is a lot better when one understands what one is discussing.....

FNMA, Freddie Mac, FHA and VA are known as "agencies" and they buy loans from the originators.....they don't buy these types of loans....

These sub prime loans were bought by non-regulated private investors....

Even if 25% of these borrowers lose their home, you still have 75% that have a home that would not have had one under the old financial structure of regulated lending....

SteveD
 
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